Oil stocks fall hard on steep market losses

Economic meltdown points to dwindling energy demand

SAN FRANCISCO (MarketWatch) - Energy stocks took another pounding Thursday as the Dow was knocked another 678 points lower, fanning fears that energy demand faces a prolonged slump while global financial markets struggle to right themselves.

The Amex Oil Index
XOI, -1.70%
fell 11% to 854 points, with all 13 components ending deep in the red, dragging the index back to levels last seen in June of 2005.

Chevron Corp.
CVX, -4.89%
, the second-biggest U.S.-based oil company, fell 12.5% to $64. Chevron and Exxon Mobil are both part of the Dow Jones Industrial Average
which ended the session with a 678-point drop to 8,579, its third-worst one-day point loss. See Market Snapshot.

Behind the carnage was another day of flight from equities as economic uncertainties kept the bears in firm control of the market, overpowering a modest rally at the start of the day.

Crude-oil prices came in the for same punishment, falling $2.36 to close at $85.59 a barrel on the New York Mercantile Exchange, their lowest level in a tumultuous year that saw it surge at one point as high as $147 a barrel. See Futures Movers.

While falling oil prices are normally welcome news for refiners, who buy crude on the open market, the prospect of further drops in fuel demand from the industrial and transportation industries made them among the session's biggest percentage decliners. Valero
COP, -3.32%
shares fell 15% to $19.06. Hess
VLO, +2.77%
shed 14.1% to end the day at $53.50.

Things were no better in the natural gas sector, where the Amex Natural Gas Index
HES, -2.19%
dropped 11%, lead by Chesapeake Energy
XNG, -0.78%
which lost 20% of its market value, ending at $17.71 a share. The index is now down 46% from its mid-summer high, an even worse performance than the 42% drop by the Amex Oil Index.

The Philadelphia Oil Services Index
CHK, -3.46%
emerged the session's relative winner, beaten down a mere 8.5% to 156.7 points. But there were no winners in this group either, despite a valiant rally by some of the index's 15 components early in the day. The index is down 47% over the past 12 months and down a staggering 56% from its all-time high in early July.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.